Assessing the Costs of Adaptation to Climate Change; A Review of the UNFCCC and other recent estimates

In this report, a team of independent experts find major shortcomings in past estimates of the costs of adaptation to climate change. The United Nations Framework Convention on Climate Change (UNFCCC) in 2007 estimated the costs of adaptation in six key sectors (water, infrastructure, human health, coastal zones, natural ecosystems, and agriculture, forestry and fisheries). But as Martin Parry and his co-contributors argue, the UNFCCC most likely underestimated the costs of adaptation in these sectors by a factor of 2–3, and they put forward three main reasons why this might be the case. The UNFCC provided incomplete estimates in some sectors; they used “climate mark-ups” against low levels of assumed investment; and they overlooked key sectors such as mining, retailing, tourism, energy, and manufacturing. The UNFCCC estimates also failed to make allowances for the costs of addressing the “adaptation deficits” in many low-income nations, which currently lack adequate infrastructure or health care, and they failed to consider “residual damage”, or the costs of damage not adapted to. Such costs may be significant and are likely to increase over time.

The report contains chapters on each of the UNFCCC’s six sectors; also a summary of key findings, an introductory chapter, and a final chapter on the costs and benefits of adaptation. Chapter 1 highlights the imprecision and range of global estimates. With costs of adaptation varying from US$ 4 billion to US$ 100 billion per annum, there is a “fundamental problem” with existing approaches (page 24); current methods are marred by major gaps and uncertainties. Investment in mitigation and development is also crucial, without which adaptation costs will only rise.

The following chapters critically assess the UNFCCC’s estimates. The chapter on agriculture, forestry and fisheries suggests that the UNFCCC provided a reasonable first-order approximation of costs, but residual damage was overlooked and bottom-up case studies are still needed, which may uncover additional costs. This chapter also emphasizes the methodological challenges of estimating adaptation costs in this sector. The next chapter examines natural ecosystems. Although the UNFCCC offered first estimates of costs, the figures excluded adaptation of marine protected areas and the wider landscape. The UNFCCC thus underestimated the costs, although the chapter warns against double-counting adaptation costs in agriculture and natural ecosystems. The chapter on infrastructure suggests that the UNFCCC’s estimates for this sector are far too low and highly inappropriate for nations with large existing deficits in the kinds of infrastructure that are central to protecting lives, homes and livelihoods from climate change impacts. Infrastructure is actually the largest component of the UNFCCC’s adaptation estimates, ranging from an additional US$ 8 billion to US$ 130 billion by 2030. But calculations were based simply on adding a small increment to infrastructure investment, ignoring existing deficits in low- and middle-income nations. The cost of adapting Africa’s infrastructure was accordingly only US$ 22–371 million, an underestimate of perhaps 2–3 orders of magnitude. And by utilizing a narrow definition of “infrastructure,” the UNFCCC excluded housing costs, social infrastructure, disaster response infrastructure and institutional capacity to maintain infrastructure. Case studies are needed to establish more appropriate estimates and the authors offer policy recommendations to address infrastructure deficits, establish bottom-up cost estimates and incorporate housing into discussions of infrastructure adaptation.

The remaining chapters on water, human health and low-lying settlements again identify major shortcomings and are highly relevant to urban researchers. The UNFCCC’s estimates on low-lying settlements may be more reliable than those for other sectors, but estimates for coastal zones again overlooked residual da